Your restaurant’s inventory par levels and food costs go hand in hand.
It’s one of the hardest things to juggle… Having enough inventory to meet demand each week, but also keeping it low, as to avoid stockpiling or food waste.
We mentioned this in our last article, but keeping track of inventory (and your par levels) is essential to the success of your restaurant.
Lower inventory levels help:
- Reduce spoilage
- Reduce food waste
- Keep your inventory turnover rate healthy and under control
What does par mean for restaurants?
So, what is par for a restaurant?
You’ve probably heard the term in golf, but maybe not when referring to a restaurant’s inventory levels.
Similar concept… Your par level is the minimum amount of inventory needed to meet the demand from your customers while providing a cushion in case of unexpected demand (also called a safety stock).
When your inventory hits below your calculated par level, an order should be placed to restock the item. Pars help keep your restaurant running at an optimal level.
Calculating Restaurant Inventory Par Levels
To start calculating your restaurant’s inventory par levels for each ingredient, you’ll need a few things.
- Delivery schedules for each item
- Customer demand for each item (sales report)
- Average inventory
We recommend you calculate an item’s inventory turnover rate first to get a better understanding of its demand (how many days it takes to sell your inventory).
Once you’ve gathered an item’s inventory on hand ratio and sales report, you’ll be to gauge how much product is used between each delivery and how fast you go through inventory (turnover).
A general formula for estimating par level is as follows:
- Par level = (weekly inventory use + Safety stock) / Deliveries per week
- (14 cases used weekly + 3 cases (20% safety)) / 2 deliveries per week = 8.5
- In this example, the par level for this item would be 8.5 cases.
Safety stock levels are different for every ingredient. But in general, a good rule of thumb is to have around 20-30% of weekly invoice use in safety stock. This will allow for unexpected demand. But it’s important to review your sales reports and inventory turnover rate, this will allow you to better estimate and avoid food waste or stockpiling.
When Should Inventory Exceed Par Levels?
There are a few instances that you’ll run into that will require you to hold inventory in excess of your par level. They include:
- Events and holidays – Easter, Fourth of July, Thanksgiving, etc.
- Delivery issues – Natural disasters, weekends, and holiday can cause delays in delivery. Some restaurant will have to carry inventory in excess when this happens.
Understanding your restaurant’s par levels will help keep your business running at an optimal level. Using data from purchases (sales report) and inventory levels, you’ll be able to calculate each ingredient par level with better accuracy. If using Orderly, we provide you with everything needed to estimate par levels. You have access to sales, food spend, food cost, cost of goods sold, and so much more.
Let Orderly Make Your Restaurant Management Hassle-Free
Our customer success team members help you simplify food costing and restaurant management. Gone are the days of confusing shelf-to-sheets and hours of data entry just to get your cost of goods sold. Learn how Orderly can help your restaurant become more profitable.